Deregulation's big lie

FCC chairman Michael Powell says the WorldCom debacle may result in more telecom mergers. So who ends up losing? We all do, explains one industry expert.

By Katharine Mieszkowski

Jul 16, 2002 | If the latest multibillion-dollar accounting scandal shuts down WorldCom, a worst-case scenario could see some 20 million customers losing their dial tone. To prevent this data-death fallout, Federal Communications Commission chairman Michael Powell suggested, in an interview in Monday's Wall Street Journal, that a Baby Bell might be allowed to buy the nation's second-largest long-distance carrier to keep the phone and data lines open.

Wait. A large regional phone carrier eating up a major long-distance provider? "Hello, this is Ma Bell calling!"

This isn't how things were supposed to happen. The breakup of the AT&T monopoly in 1984 was designed to end monopoly control of phone services. The further deregulation of the telecom industry after the Telecom Reform Act of 1996 also promised that increased competition would bring lower prices and better service to consumers.

But Robert McChesney, a professor at the Institute of Communications Research at the University of Illinois at Urbana-Champaign, argues that it's precisely the deregulation of the telecommunications industry that has led to the current industry crisis. And according to McChesney, Powell is little more than a tool of free-market absolutists, accelerating the reconcentration of control in the industry -- only this time, without any government oversight to make sure that customers don't get taken to the cleaners.

The author of "Telecommunications, Mass Media, and Democracy: The Battle for the Control of U.S. Broadcasting, 1928-1935" and "Rich Media, Poor Democracy: Communication Politics in Dubious Times," McChesney explained his views in a phone interview with Salon.

FCC chairman Michael Powell said that the current "utter crisis" in the telecom business could be a reason to allow a Baby Bell to take over WorldCom. What's your reaction to this?

It shows what a big lie deregulation was based on.

The big lie of deregulation was that by letting these companies do whatever they wanted with much less oversight, competition would force them to better serve the public with lower prices and better service through the force of market competition.

But what "deregulation" really means isn't [a kind of] deregulation where there is no regulation [at all]. It just means regulation on behalf of powerful interests with no one representing the public. So these companies totally fleeced the public and left everyone -- their shareholders, workers and taxpayers -- holding the bag.

And we got worse service; prices have come down marginally in some markets, but I think that most economists think they would have come down much more dramatically had there been genuine competition. So, we have the worst of both worlds. We have concentration without any public oversight or much less public oversight.

And that's the deplorable situation we're in today, where we have a company like WorldCom, which controls an enormous percentage of Internet traffic, teetering on the edge of going out of business. It would have been unthinkable for this to take place six years ago. It used to be if you're going to have highly concentrated markets at least the government would be there looking out for us. Now, that's gone.

Next Page: "Michael Powell is just a bagman for moneyed interests"

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